June 2011 Archive for The Farm CPA

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Ethanol allows for a reduction in demand for foreign oil and is a cleaner burning fuel. At current production rates, ethanol provides more motor fuel for the United States than it imports from Saudia Arabia, the equivalent of about 1 million barrels a day.

Also, the ethanol industry is more mature than when the tax credit subsidy was originally placed into service and ethanol now actually costs about 30 cents cheaper than gas. This difference would be reduce by eliminating the 45 cent per gallon credit, but it would not have a dramatic effect on the industry.

This is especially true due to the mandate to blend 12.6 billion gallons of ethanol into gasoline this year. As long as that mandate remains, ethanol should remain a vibrant industry and the Obama industry stands behind it so far.

The ethanol industry would like to see the elimination of the tax credit (since it really goes to the oil industry, not the ethanol industry) and have the savings put into infrastructure to deliver an 85/15 blend to consumers.

Major changes to the tax structure of the ethanol industry will most likely happen this year. It will be interesting to see what the final change will be.